Gas purchase commitments are given by EDF in connection with its expanding gas supply business.
Gas purchases for supply, delivery and storage are mostly undertaken through long-term contracts and forward purchases from EDF Trading.
Under the contract with the Dunkerque LNG methane terminal, EDF benefits from approximately 61% of the terminal’s regasification capacities until 2037, in return for payment of an annual premium of approximately €150 million. A provision for onerous contracts is recorded in connection with this contract.
For the period 2008 to 2017, EDF was notified of proposed tax adjustments, notably concerning the tax-deductibility of certain long-term liabilities. This recurrent reassessment, which is applied for each year, represents a cumulative financial risk of some €556 million in income taxes at 31 December 2019. In two rulings made in 2017 and another in 2019, Montreuil Administrative Court recognised the tax-deductibility of these liabilities and validated the position taken by the Company. The Minister appealed against two of these rulings. In January 2020, Versailles Administrative Court upheld EDF’s position for the year 2008.
For the years 2012 to 2017, the French tax authorities notified the Company of certain recurrent tax reassessments concerning the contribution sur la valeur ajoutée des entreprises (tax on corporate value added) and questioned the deductibility of long-term provisions.
EDF is party to a number of labour lawsuits, primarily regarding working hours. EDF estimates that none of these lawsuits, individually, is likely to have a significant impact on its financial results or financial position. However, because they relate to situations that could concern a large number of EDF’s employees, any increase in such litigations could have a potentially negative impact on EDF’s financial position (although the risk has been mitigated by the signature of the agreement on fixed numbers of working days in 2016).
Article L. 594 of France’s Environment Code and its implementing regulations require assets (dedicated assets) to be set aside for secure financing of nuclear plant decommissioning expenses and long-term storage expenses for radioactive waste. These regulations govern the way dedicated assets are built up, and the management and governance of the funds themselves. Dedicated assets are clearly identified and managed separately from the Company’s other financial assets and investments. They are also subject to specific monitoring and control by the Board of Directors and the administrative authorities.
The law requires the realisable value of dedicated assets to be higher than the value of the provisions corresponding to the present value of the long-term nuclear expenses defined above.
The Decree of 24 March 2015 contains two measures concerning dedicated assets:
The Decree of 29 December 2010 made RTE shares eligible for inclusion in dedicated assets subject to certain conditions and administrative authorisation. The Decree of 19 December 2016 authorised allocation of the shares of CTE, which holds 100% of the capital of RTE, to the portfolio of dedicated assets from 31 December 2017, subject to conditions (see note 38.2.2 below).
The Decree of 24 July 2013 revised the list of eligible assets by reference to the Insurance Code, making unlisted assets eligible subject to certain conditions.
EDF received ministerial authorisation on 31 May 2018 to increase the portion of unlisted assets in its dedicated assets from 10% to 15% subject to conditions (this does not apply to the shares of CTE or real estate assets).
Given the applicable regulations, these dedicated assets are a highly specific category of assets.
Dedicated assets are structured and managed according to a strategic allocation defined by the Board of Directors and reported to the administrative authorities. The strategic allocation is designed to meet the overall objective of long-term coverage of obligations, and determines the structure and management of the portfolio as a whole. It takes into account regulatory constraints concerning the nature and liquidity of the dedicated asset, the financial outlook for the equity and bond markets, and the diversifying contribution of unlisted assets.
As part of the strategic allocation review process and in order to pursue the diversification into unlisted assets begun in 2010 with the shares in RTE, in 2013 the Board of Directors approved the introduction of an unlisted asset portfolio alongside the diversified equity and bond investments. This portfolio is managed by the EDF SA Division “EDF Invest”, which was formed following the Decree of 24 July 2013 on secure funding for nuclear expenses.
EDF Invest has the following target asset classes: infrastructures, real estate and debt or equity funds.
Following the French government’s authorisation issued on 8 February 2013, and the approval of the Nuclear Commitments Monitoring Committee and the Board of Directors’ decision of 13 February 2013, EDF allocated the entire receivable recognised by the French State, representing the accumulated shortfall in CSPE financing at 31 December 2012, to its dedicated assets.
This financial receivable was increased in the financial statements at 31 December 2015 by an additional amount estimated at €644 million that was not allocated to dedicated assets, corresponding to the shortfalls in compensation that arose between the beginning of 2013 and the end of 2015, as acknowledged by the State in a ministerial letter of 26 January 2016. In accordance with this letter, the total financial receivable bears interest at 1.72% and will be repaid under a revised schedule ending in late 2020. This schedule was laid down in a ministerial order of 2 December 2016, based on the CRE’s confirmation of the shortfall for 2015.
